Final answer:
Leverage ratios are used to assess a firm's capital structure and long-term solvency, giving insight into its debt levels and financial leverage.
Step-by-step explanation:
The category of ratios that is useful in assessing the capital structure and long-term solvency of a firm is leverage ratios. These ratios help to evaluate a company's debt levels compared to its equity.
Leverage ratios offer insights into the financial leverage of the company, which is important for understanding how the firm finances its overall operations and growth, and how capable it is of meeting its long-term obligations.
When assessing leverage ratios, one should consider how the company has accumulated its financial capital, which includes methods such as early-stage investors, reinvesting profits, borrowing from banks or issuing bonds, and selling stock.
Each financing decision affects the company's leverage and, thus, its capital structure. Proper understanding of leverage ratios assists in the analysis of risk and potential return on investment.